Superannuation

Print

What is superannuation?

Super at a glance:

  • If you are employed and earn at least $450 per month (before tax) and you are aged over 18 and under 70, your employer is required to make regular superannuation contributions on your behalf equal to 9% of your ordinary time earnings. This is called the Super Guarantee (SG)
  • Superannuation is a long-term savings product designed to help you fund your retirement
  • The more you contribute to super, the more money you'll have in retirement
  • Super is a long-term investment - your super fund invests your money in your preferred investment option 
  • There are tax advantages to contributing to super
  • You cannot access your super until you reach what the Government calls Preservation Age

Contributing to super

Making contributions to your super fund for yourself, in addition to the contributions your employer makes on your behalf will speed up the rate at which your superannuation grows. You don’t just benefit from the actual amounts you contribute; the annual earnings on the contributions you make mean that you earn compound interest on a larger amount year after year.

In addition, depending on which method of contributing is the most appropriate for you in your particular circumstances you may:

  • Improve the value of your wage or salary, by improving your income tax situation and/or 
  • Be in a position to benefit from the Government’s superannuation Co-Contribution Scheme, whereby the Government pays additional money into your superannuation account

There are two methods of making additional contributions:

  • Before-tax (technically referred to as ‘concessional contributions’)
  • After-tax (technically referred to as ‘non-concessional contributions’)

Read more about contributing to super

Member Investment Choice

Member Investment Choice (MIC) enables you to remain involved with the money held in your superannuation account. This means that although your money is invested for the long term, you can make decisions about the type of investment strategy that best suits you and allows you to switch between strategies as your financial objectives or your priorities with respect to risk and return change.

Most superannuation funds have a combination of diversified options (these are strategic mixes of investment classes determined by the fund’s board), and investment sector (investment class) options that members can choose from. Typically, these are:

Diversified Options

Investment Sector Options
  • A Balanced or Growth option
  • An Active or Shares Plus option
  • A Low Risk or Capital Stable option
  • A Capital Guaranteed option
  • A sustainable option
  • Australian Shares
  • International Shares
  • Property
  • Fixed Interest
  • Cash

A growing number of funds offer additional investment sector options such as Private Equity, or Infrastructure. Several funds also offer members the option of investing directly in shares.

Members who do not actively choose an investment option are normally invested into their fund’s default option. This is generally a Balanced option which, based on our experience of dealing with many Balanced Funds, normally holds a diversified investment mix of about 70% Growth assets (such as Shares and Property) and 30% Defensive assets (such as Fixed Interest and Cash).

Growth assets tend to be more volatile (subject to market fluctuations in value) than defensive assets, but they also tend to offer higher returns over the long-term. The mix of growth and defensive returns in Balanced Funds is a strategy to manage risk. 

If you have any questions about the mix of your current superannuation investment, contact us or your super fund.

Concessional taxation arrangements

  • Employer contributions are deducted before income tax is levied. A Contributions Tax of 15% is deducted from them and paid to the ATO after they are received by the superannuation fund.
  • Members can make Salary Sacrifice contributions, which are deducted from gross salary before income tax is deducted and are also subject to the 15% Contributions Tax.
  • Generally, the maximum tax payable by a superannuation fund on its investment earnings is 15%, which is less than most other forms of investments because most people pay a higher marginal tax rate.
  • Superannuation Income Streams and lump sum payments are tax-free to people who are 60 years of age or over, unless their superannuation includes any post-June 1983 untaxed component, which generally only applies to certain Government funds.
  • Regular income streams/payments drawn down from superannuation by people under 60 years of age receive special tax treatment.
  • People under 60 years of age who claim their super do not pay tax on any component accrued from after-tax contributions.

Ancillary benefits

Many industry super funds also provide access to ancillary benefits including:

We suggest that you visit your fund’s website to discover what other benefits you may be able to access through your industry super fund membership.

 

I want to speak to an Adviser about my super

Contact Us to arrange for an Adviser to call you back when it suits you.

 

Last updated on 9th March 2012